The Rise of Sustainable Real Estate Investing

What is Sustainable Real Estate?

Sustainable real estate is the term to describe all developments that are designed and constructed with the main goal to minimise negative environmental impact. Sustainable properties are built to improve energy efficiency, conserve water, reduce waste, and prioritise the use of renewable resources. Eco-friendly developments are becoming more popular as more people become aware of our impact on the environment. Investing in real estate not only has a positive effect on the environment but it can also provide long-term investment profit. 

Sustainable real estate also refers to the communities and neighbourhoods designed to be eco-friendly. Towns considered sustainable are promoting a range of ways for individuals to reduce their carbon footprints. Such as encouraging walking and cycling by creating pedestrianised areas in cities and creating more green spaces and parks. There is a ’15-minute city’ concept which is a goal for towns to have everything that residents need to work and live within a 15-minute journey. This encourages reducing car usage, which in turn leads to a decrease in carbon footprint.

Current Government regulations require all rental properties to have an EPC rating of E or higher before they become tenanted. In 2021, a new legislation was revealed to improve the energy efficiency of homes in the buy-to-let sector. Soon, all new tenancies must have an EPC rating of at least C, by 2025. All existing tenancies must comply with this rule by 2028.

Demand for energy-efficient homes is rapidly growing with many young professionals opting to buy a new build due to the developments being built to a higher specification. These developments tend to be built with an energy-efficient spec and installed with newer appliances and systems to improve the EPC rating and create more sustainable living. 

Investing in sustainable real estate offers a range of benefits for investors and for the environment. Even though it will be challenging to implement sustainability throughout the UK due to high costs, sustainable real estate is predicted to become increasingly popular in the upcoming years.

Sustainable developments usually have lower maintenance and operating costs due to new, energy-efficient features. This creates higher profits for investors as the bills and expenses do not cost as much as a development constructed to a standard, non-sustainable specification.

Many off-plan developments are being constructed with sustainability in mind. New-build homes tend to be built with eco-friendly materials. Research shows that 80% of new developments have an A or B energy-efficiency rating, which is better than most existing homes. 

Tenants are usually happy to pay more for a rental property if the development offers improved internal comfort levels, lower energy bills and improved air quality. This creates an appealing living space for residents, leading to happier, longer-staying tenants. 

Sustainable developments are a future-proof investment as governments across the world are becoming more strict and introducing more legislation based on sustainability. By investing in newly built sustainable property, investors are already ahead of future legislation. Therefore no upgrades to the developments will need to be done as soon as older buildings. For instance, investors who own a property with an EPC rating of E will need to make several upgrades to achieve a rating of C, incurring significant costs.

Birmingham

Birmingham City Council is committed to a 60% reduction in carbon emissions produced in the City by 2027.  Part of the plans to reach the goal is to ensure that new buildings within the City meet high standards to ensure they are of sustainable design. Meaning that new builds will be attractive to tenants looking for a more eco-friendly home. New developments should be designed and constructed to maximise energy efficiency and the use of low-carbon energy, conserve water, minimise waste, maximise recycling during construction and operation and more. 

Plans are underway for a large scheme that aims to ‘rebuild’ the city with new parks and green spaces, creating areas residents will enjoy visiting. Since the Covid lockdown, there has been a heightened demand for properties close to parks. So properties near these upcoming green spaces will have a high demand, attracting more residents. The designs for the ‘Our Future City Plan 2040’ will transform Birmingham into an exciting, original, and more sustainable city. The plans for this project are to create cultural spaces, green walkways, tree-lined parks, and more accessible areas. This will benefit residents and working professionals as improving connectivity will make commuting easier and will attract more buyers looking for property, boosting rental demand in the area.